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Investigating long-run demand for broad money in the Gulf Arab countries

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  • Syed Abul Basher
  • Stefano Fachin

Abstract

We estimate the long-run demand for broad money for the six Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) over the 1980–2012 period. Applying time series and panel econometric tests, we first document the existence of long-run equilibrium relationship for money demand – both nationally and regionally. The estimated income elasticities are generally lower than those reported in the literature, while the interest elasticities are more in line with the standard money demand literature. We discuss how the movements in income velocity can reconcile the varying income and interest elasticities documented across the six countries. A discussion on the homogeneity (poolability) of the long-run money demand parameters and the error correction model of money demand is also provided.

Suggested Citation

  • Syed Abul Basher & Stefano Fachin, 2014. "Investigating long-run demand for broad money in the Gulf Arab countries," Middle East Development Journal, Taylor & Francis Journals, vol. 6(2), pages 199-214, July.
    • Handle: RePEc:taf:rmdjxx:v:6:y:2014:i:2:p:199-214
    DOI: 10.1080/17938120.2014.961330
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    Cited by:

    1. Haider Mahmood & Tarek Tawfik Yousef Alkhateeb, 2018. "Asymmetrical effects of real exchange rate on the money demand in Saudi Arabia: A non-linear ARDL approach," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-12, November.
    2. Fakhri J. Hasanov & Moayad H. Al Rasasi & Salah S. Alsayaary & Ziyadh Alfawzan, 2022. "Money demand under a fixed exchange rate regime: the case of Saudi Arabia," Journal of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 385-411, December.
    3. Helmi Hamdi & Ali Said & Rashid Sbia, 2015. "Empirical Evidence on the Long-Run Money Demand Function in the Gulf Cooperation Council Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 603-612.
    4. Essahbi Essaadi, 2017. "The feasibility of currency union in Gulf Cooperation Council countries: A business cycle synchronisation view," The World Economy, Wiley Blackwell, vol. 40(10), pages 2153-2171, October.
    5. Rabindra Nepal & Nirash Paija, 2020. "Stability of Money Demand Function in the SAARC Region: A Panel Co-Integration Approach," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(1), pages 111-128.
    6. Ufuk CAN & Zeynep Gizem CAN & Süleyman DEĞİRMEN, 2019. "Paranın Dolaşım Hızının ve Para Talebi Fonksiyonunun Ekonometrik Analizi: Türkiye Örneği," Istanbul Business Research, Istanbul University Business School, vol. 48(2), pages 218-247, November.

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